THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[18:00:00]

WOLF BLITZER, CNN ANCHOR: The president dismisses new reports about his campaign's contacts with Russia as a joke. As he tries to distance himself from the Kremlin, is he ready to push back at Vladimir Putin's new provocations?

Refusing to answer. Mr. Trump took multiple detours when asked about sensitive issues like anti-Semitism and racism. How does that square with his renewed insistence that he is trying to unify the country?

And new normal? While the president's no-holds-barred performance was likely a hit with his supporters, many D.C. veterans are lifting their jaws off the floor. I will talk with former Defense Secretary Leon Panetta and renowned journalist Tom Friedman.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in the THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: We're following a lot of breaking news out of President Trump's marathon news conference, a free-wheeling and combative exchange with reporters, unlike anything we have seen in the White House for a long time.

Among the many headlines, the president said he did not direct his fired national security adviser, Michael Flynn, to discuss sanctions with Russia's ambassador to the U.S. before Inauguration Day.

But he said he would have, despite a law that bars unauthorized people from communicating with foreign governments. Mr. Trump says he's asked the Justice Department to look into leaks from the intelligence community and he denied reports that some of his high-level aides had constant contact with the Russians during the campaign, saying he has nothing to do with Russia.

The president says he will revive his controversial travel ban by issuing a new executive order that's tailored to the federal court decision that had put a hold on his ban. He named the Bush administration veteran Alexander Acosta as his new pick to become the labor secretary, after Andrew Puzder withdrew.

But the most stunning aspect of the news conference may have been the president's extensive musings about his accomplishments and his grievances. He spent considerable time lambasting the news media as dishonest, blaming Democrats for the mess he says he inherited and denying that his administration is in turmoil, claiming it's running like a fine-tuned machine.

I will get reaction from Leon Panetta, who served as both defense secretary and CIA director under President Obama. Our correspondents, analysts and guests, they are standing by as we bring you full coverage of all the news that is breaking right now.

Jim, this is the first time the president addressed some very tough questions about the ouster of Michael Flynn and new reporting about his campaign's contacts with the Russia.

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: That's exactly right, Wolf, addressed, but not answered. He contradicted himself in a single sentence to the leaks are real, but the news is fake.

He cited denials by the people involved in these communications with Russia, but then he seemed to say that even if there were communications that it didn't involve him. So more confusion, leaving many questions unanswered.

(BEGIN VIDEOTAPE)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: It's all fake news. It's all fake news.

SCIUTTO (voice-over): It was the first time the president answered questions on CNN's reporting during his presidential campaign senior advisers were in contact communication with Russia.

TRUMP: It's a joke. And the people mentioned in the story, I notice they were on television today saying they never even spoke to Russia.

SCIUTTO: Trump said he was not aware of any campaign advisers or staffers speaking with Russia.

TRUMP: No, nobody that I know of.

SCIUTTO: But CNN is told by U.S. officials that then president-elect Trump and then President Obama were briefed on extensive communications between Russian officials and other Russians known to U.S. intelligence and people associated with the Trump campaign.

When pressed, the president said only that he himself had nothing to do with it.

TRUMP: Well, I had nothing to do with it.

SCIUTTO: Mr. Trump also denied any commercial ties to Russia.

TRUMP: I own nothing in Russia. I have no loans in Russia. I don't have any deals in Russia.

SCIUTTO: And when Trump's foreign national security adviser, Michael Flynn, spoke to Russia about sanctions, Trump said that he didn't instruct him to.

TRUMP: I didn't direct him. But I would have directed him, because that's his job.

SCIUTTO: Despite his blanket denials, Trump still vowed to find and potentially prosecute those in the intelligence community who he accuses of leaking information to reporters behind stories that he claims are fake.

TRUMP: I've actually called the Justice Department to look into the leaks. Those are criminal leaks. They're put out by people either in agencies -- I think you'll see it stopping because now we have our people in.

SCIUTTO: At the same time, President Trump plans a review of all the intelligence agencies. CNN has learned the White House is considering tapping billionaire Stephen Feinberg, founder of a New York investment firm and longtime friend of the president, to lead the review.

TRUMP: The gentleman you mentioned is a very talented man, very successful man and he's offered his services and you know, it's something we may take advantage of. But I don't think we're need that at all because of the fact that you know, I think that we are going to be able to straighten it out very easily on its own.

(END VIDEOTAPE)

[18:05:10]

SCIUTTO: The man who ran those intelligence agencies until just about a month ago, that's the former director of national intelligence, James Clapper, released a statement just after the president's press conference warning, it seemed, against too aggressive or too damaging an investigation of the intelligence agencies.

He said the following, that: "Leaks need to be investigated, but those investigations should be conducted in a manner that's not disparaging of our designated I.C." -- that's intelligence community -- "professionals, nor destructive to the entire community."

Disparaging or destructive, some very strong words there, Wolf, from the former director of national intelligence, James Clapper.

Athena, reporters went in expecting a new Cabinet announcement, but the president gave them a whole lot more. ATHENA JONES, CNN WHITE HOUSE CORRESPONDENT: Boy, did he, Wolf.

This remarkable news conference did begin with that announcement that Florida International Law School dean Alex Acosta would be the president's new pick to head the Labor Department. But it then went on for one hour, 15 minutes. It was classic Trump.

(BEGIN VIDEOTAPE)

JONES (voice-over): In an epic news conference, reminiscent of his tussles with the media during his run for the White House, President Trump denied connections between his campaign and Russian officials.

TRUMP: No, nobody that I know of.

JONES: or himself and Russia.

TRUMP: Speaking for myself, I own nothing in Russia. I have no loans in Russia. I don't have any deals in Russia.

JONES: In his first full-scale session with White House reporters, the president insisting amidst a flurry of top headlines there is no turmoil within his administration.

TRUMP: This administration is running like a fine-tuned machine.

JONES: And repeatedly bashing his favorite target, the media.

TRUMP: I'm really not a bad person, by the way. No, but the tone is such -- I do get good ratings, you have to admit that. The press, honestly, is out of control. The level of dishonesty is out of control.

JONES: Speaking of things that are not true, the president repeated his erroneous claim that his was the biggest Electoral College win since Ronald Reagan, a comment quickly challenged.

QUESTION: You said today that you had the biggest electoral margin since Ronald Reagan with 306 electoral votes.

In fact, President Obama got 332.

(CROSSTALK)

QUESTION: President Obama, 332 and George H.W. Bush 426 when he won as president.

So, why should Americans trust you...

(CROSSTALK)

TRUMP: No, I was told -- I was given that information. I don't know. I was just given it. We had a very, very big margin.

QUESTION: I guess my question is, why should Americans trust you when you have accused the information they've received of being fake, when you're providing information that is fake?

TRUMP: Well, I don't know, I was given that information. I was given -- actually, I've seen that information around. But it was a very substantial victory. Do you agree with that?

JONES: The president also spent time touting the record high stock market, a "surge of optimism" in the business world, and what he said were his high approval ratings,despite recent surveys from Pew Research, Gallup and CNN showing he's deeply unpopular.

He also complained about the state of the country he inherited.

TRUMP: I inherited a mess. It's a mess. At home and abroad. A mess. We have had a very divided -- I didn't come along and divide this country. This country was seriously divided before I got here.

JONES: And when he was asked for the second day in a row about a rise in anti-Semitic attacks, he responded:

TRUMP: Number one, I am the least anti-Semitic person that you have ever seen in your entire life. Number two, racism, the least racist person.

JONES: Later asking a black reporter to help set up a meeting with the Congressional Black Caucus.

TRUMP: We're going to do a lot of work on the inner cities.

I have great people lined up to help with the inner cities. OK?

QUESTION: Well, when you say the inner cities, are you going -- are you going to include the CBC, Mr. President, in your conversations with your -- your urban agenda, your inner city agenda, as well as --

TRUMP: Am I going to include who?

QUESTION: Are you going to include the Congressional Black Caucus and the Congressional...

TRUMP: Well, I would. I tell you what. Do you want to set up the meeting? Do you want to set up the meeting?

(CROSSTALK)

QUESTION: No -- no -- no. I'm not...

TRUMP: Are they friends of yours?

QUESTION: I'm just a reporter.

TRUMP: Well, go ahead. Set up the meeting.

QUESTION: I know some of them, but I'm sure they're watching right now.

TRUMP: Let's go set up a meeting. (END VIDEOTAPE)

JONES: Some remarkable exchanges there.

And the president also made news on the travel ban, promising a new comprehensive executive order will come next week, and suggesting it would be written more narrowly tailored to what he called a "very bad decision" by an appeals court he said was in chaos and turmoil.

[18:10:00]

Asked what he would do -- how he would deal with the so-called dreamers, those young people brought to the country illegally as children, the president said his administration would show "great heart." He also acknowledged this is a very, very difficult subject for him -- Wolf.

BLITZER: Athena, thank you, Athena Jones at the White House.

The White House press corps had a rare opportunity today to directly President Trump, who has been avoiding reporters from many of the major national news organizations for weeks.

Our senior White House correspondent, Jim Acosta, had a pretty remarkable exchange with the president.

You really pushed him on claims about fake news. Tell our viewers about that, Jim.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: That's right, Wolf. You heard the president today talk about fake news. At one point, he referred to CNN as very fake news. I reminded him we are real news.

But almost in the same breath that he was attacking the media as fake news and the reports about contacts between his campaign and the Russians as being fake news, he acknowledged that the leaks coming out of his own administration are real leaks.

And so I asked him about that inconsistency. Here is what he had to say.

(BEGIN VIDEO CLIP)

ACOSTA: You said that the leaks are real, but the news is fake. I guess I don't understand. It seems that there's a disconnect there. If the information coming from those leaks is real, then how can the stories be fake?

TRUMP: The reporting is fake. Look, look...

(CROSSTALK)

TRUMP: You know what it is? Here's the thing.

The public isn't -- you know, they read newspapers, they see television, they watch. They don't know if it's true or false because they're not involved. I'm involved. I've been involved with this stuff all my life. But I'm involved. So I know when you're telling the truth or when you're not. I just see many, many untruthful things.

And I will tell you what else I see. I see tone. You know the word tone. The tone is such hatred. I'm really not a bad person, by the way. No, but the tone is such -- I do get good ratings, you have to admit that -- the tone is such hatred.

I watched this morning a couple of the networks. And I have to say, "FOX & Friends" in the morning, they're very honorable people. They're very -- not because they're good, because they hit me also when I do something wrong. But they have the most honest morning show. That's all I can say. It's the most honest.

But the tone, Jim. If you look -- the hatred.

Now, they'll take this news conference -- I'm actually having a very good time, OK? But they'll take this news conference -- don't forget, that's the way I won. Remember, I used to give you a news conference every time I made a speech, which was like every day. OK?

(CROSSTALK)

TRUMP: No, that's how I won. I won with news conferences and probably speeches. I certainly didn't win by people listening to you people. That's for sure. But I'm having a good time.

Tomorrow, they will say, Donald Trump rants and raves at the press. I'm not ranting and raving. I'm just telling you. You know, you're dishonest people. But -- but I'm not ranting and raving. I love this. I'm having a good time doing it.

But, tomorrow, the headlines are going to be, Donald Trump rants and raves. I'm not ranting and raving.

(END VIDEO CLIP)

ACOSTA: And, of course, the other inconsistency, Wolf, is that as the president is going off on leaks from his administration to the news media, it was Donald Trump, candidate Donald Trump during the campaign who said he loved WikiLeaks, he loved those leaks coming, according to the U.S. intelligence community from Russian operatives to WikiLeaks to his campaign, that was used to damage Hillary Clinton during the course of that election cycle, and not to mention the fact that at one news conference in late July in Florida one of his golf courses, he invited the Russians -- he said he was only joking later on.

But he invited the Russians to kind the find those "missing" 33,000 Hillary Clinton e-mails. And so some inconsistencies today, along with a lot of media criticism, of course.

BLITZER: You also, Jim, you pressed the president on the people's faith in the First Amendment. Talk about that.

ACOSTA: Right. Wolf, this is a question honestly that I have been wanting to ask

President Trump for some time because during the course of the campaign you heard him go after the news media, calling us dishonest and disgusting and so forth and so on.

And you heard him call us again dishonest today at this news conference. My question is, well, you know, perhaps the public might have that feeling because the GOP nominee was saying this almost on a daily basis throughout the course of the campaign.

So I asked about whether or not he's undermining American faith in the news media during that news conference today and here is what happened.

(BEGIN VIDEO CLIP)

ACOSTA: But aren't you concerned, sir, that you are undermining the people's faith in the First Amendment, freedom of the press, the press in this country, when you call stories you don't like fake news? Why not just say it's a story I don't like?

TRUMP: Here's the thing. OK. I understand what you're -- and you're right about that, except this. See, I know when I should get good and when I should get bad. And, sometimes, I will say, wow, that's going to be a great story. And I will get killed.

I know what's good and bad. I'd be a pretty good reporter, not as good as you. But I know what's good. I know what's bad.

And when they change it and make it really bad, something that should be positive, sometimes something that should be very positive, they will make OK, they will even make it negative.

(END VIDEO CLIP)

[18:15:11]

ACOSTA: Now, Wolf, judging by the reaction from White House officials today, I think it's probably a safe bet that we're going to be seeing more President Trump news conferences in the coming weeks.

One reporter even asked him if he'd like to do one every week. As much as he likes to rail against us and describe us as fake news, he sort of needs us -- Wolf.

BLITZER: Jim Acosta, good work. Thanks very much for that report.

Let's get some reaction to the president's news conference from a veteran of the Obama and Clinton administrations. We're joined by Leon Panetta, who most recently served as President Obama's defense secretary, earlier as CIA director.

Mr. Secretary, thanks for joining us.

LEON PANETTA, FORMER U.S. SECRETARY OF DEFENSE: Nice to be with you, Wolf.

BLITZER: You told "The New York Times" just a few days ago, and I'm quoting now, you said: "I have never been so nervous in my lifetime about what may or may not happen in Washington."

You served in the government for almost, what, 50 years or so. After watching the president's news conference this afternoon, do you feel any differently?

PANETTA: Well, we are -- we are living in the world according to Trump. And that news conference was a remarkable display of this president.

You know, it's tough to gauge this president by a standard that has been used by past presidents. This is a president like no other president we have ever had. And he wanders between the real world and the world according to Trump.

I guess my concern is that at some point the president of the United States has to get very serious with the American people and with the press about the challenges we face and what this president is going to do to deal with those challenges.

If he simply continues to engage in this kind of personal attack, counterattack to the press, this reality TV kind of presentation, what I worry about is that not enough time is going to be focused on the real crises and the real threats that the country faces.

BLITZER: You were brought in to serve at one point as a White House chief of staff after President Clinton and his administration faced some early struggles. What does President Trump need to do now to regain control over his administration to get your confidence?

PANETTA: I think it's really important to get somebody who understands how the White House is supposed to operate.

Every person who was picked for his staff has no experience in government or in the White House. And the reality is that there is no one who has the background to try to understand the processes and procedures that ought to be in place in order to serve the president of the United States.

So I just would feel a lot more comfortable if they brought somebody in, a Republican from past administrations, somebody who understands how the White House is supposed to work, because unless there is discipline, unless there is a strict chain of command, unless there is a process put in place that provides thoughtful consideration of the options that should go to the president, you're going to have a hit- and-miss operation that could result, I think, in a serious crisis at some point. BLITZER: When you say a serious crisis at some point, let me get back

to the quote you had in "The New York Times." "I have never been so nervous in my lifetime about what may or may not happen in Washington."

If he doesn't accept your advice, tell us why you're as nervous as you are right now.

PANETTA: Well, let's just -- let's just take as an example, you know, if a major crisis develops with Iran, with Russia, in the Middle East, or with North Korea, major crisis, they take some kind of very provocative action against the United States, what is the process in the White House to deal with that?

My understanding is the National Security Council has yet to meet. We don't even have a national security adviser. Who is going to take responsibility for that crisis, provide the president with thoughtful consideration from the secretary of state and secretary of defense the recommendations that are important to present to the president so that the president can make a decision about how to handle that crisis?

That's what concerns me, is that if we had a crisis at the present time, I don't see the mechanisms within the White House to deal with that kind of crisis, and that concerns me.

[18:20:06]

BLITZER: President Trump, as you know, made the trip to the Central Intelligence Agency, the CIA, that you used to head on his first full day in office in an attempt to smooth things over with the intelligence community, but since then, he's renewed his attacks on intelligence agencies, accusing them of conspiring to leak classified information, in his words, just like Russia.

Earlier, he compared the intelligence community to Nazi Germany. You served as director of the CIA under President Obama. Is his relationship with the intelligence community beyond repair?

PANETTA: For the sake of the country, I hope that is not the case because the president's first duty is to protect our country.

And he cannot protect our country without good intelligence about what our adversaries are up to. You have to rely on information about what our adversaries are up to, what threats exist. And so I don't disagree that right now I think that relationship between the president and our intelligence agencies is not good.

There is a lot of distrust. And ultimately that has to be repaired either by the people who are there, Mike Pompeo, Dan Coats, who is going to become the new DNI. I hope that General Mattis, Secretary Mattis, plays a role as well.

My hope is that good people come in and reestablish the trust that is so important to the president of the United States if he's going to be able to protect this country. BLITZER: Mr. Secretary, stand by. There is more information we're

getting right now here in our SITUATION ROOM. We will take a quick break. We will be right back.

(COMMERCIAL BREAK)

[18:26:22]

BLITZER: We're following breaking news from the president's truly extraordinary news conference, Mr. Trump speaking at length for the first time about his ousted national security adviser, Michael Flynn.

He said he fired Flynn because he misled the vice president, but otherwise he doesn't believe Flynn did anything wrong.

We're back with former CIA defense secretary, former CIA director, Leon Panetta.

Mr. Secretary, the president at that news conference, he said he had no problem with Flynn talking sanctions with the Russian ambassador before Mr. Trump took office. In fact, he said, "I would have directed him to do it if I thought he wasn't."

Did the president just endorse highly inappropriate, possibly illegal behavior by one of his subordinates?

PANETTA: That's a statement by the president that hopefully the White House will correct, because, very frankly, although a national security adviser who is serving a new president -- and he was not in that position, but obviously had been designated as such -- has the right to talk to ambassadors and to make contact with others, but to talk about steps on sanctions that would undermine a policy of the existing administration at the time comes very close to the line of violating the Logan Act.

And so, for that reason, I think the president, as they say in Washington, hopefully misspoke.

BLITZER: General Flynn's security clearances have now been suspended while the DIA, the Defense Intelligence Agency, which he once ran, conducts a review of his behavior.

How unusual is it for a former of the DIA, former national security adviser, a former three-star general to have his security clearances suspended?

PANETTA: Well, that is the step that you would take, you know, when this kind of occurrence takes place within the White House.

The issue becomes whether or not he obviously lied to the vice president about the discussions with the Russians. And the fact that he did and he was fired, I think, should result in his losing his clearances.

BLITZER: At his news conference today, the president was also presented with a list of challenges that his administration faces regarding the relationship with Russia. Watch this exchange and listen.

(BEGIN VIDEO CLIP)

QUESTION: Mr. President, you mentioned Russia. Let's talk about some serious issues that have come up in the last week that you have had to deal with as president of the United States.

TRUMP: OK.

QUESTION: You mentioned the vessel -- the spy vessel off the coast of the United States.

TRUMP: Not good.

QUESTION: There was a ballistic missile test that many interpret as a violation of an agreement between the two countries; and a Russian plane buzzed a U.S. destroyer.

TRUMP: Not good. Not good.

QUESTION: I listened to you during the campaign.

TRUMP: Excuse me. Excuse me. When did it happen? It happened when, if you were Putin right now, you would say, hey, we're back to the old games with the United States. There's no way Trump can ever do a deal with us.

(END VIDEO CLIP)

BLITZER: He went on to blame recent Russian provocations on the negative public perception of Russia, which he says is created by the news media.

I would like you to react to the president's position.

PANETTA: I think the president really does need to understand that Russia is an adversary and Russia will do everything it can to -- to undermine the United States of America. That's where they come from.

[18:30:07] You know, I don't question his effort to try to establish a relationship with Russia. But you cannot establish a relationship with Putin or with Russia from weakness. You have to do it from strength, which means that the president of the United States, when these provocative acts take place, has got to send a very clear message to the Russians that this is unacceptable and not try to make excuses for what the Russians are doing.

BLITZER: Does Putin have the upper hand right now?

PANETTA: I think Putin has felt for a while that he has had the upper hand here and is able to kind of do whatever he wants to do: whether it's in the Ukraine, whether it's taking military force to Syria, taking the provocative steps that he's taken with regards to missile deployments, et cetera. I think he feels that he has the opportunity to do that, and nobody is going to stop him. And that's why it's important for the president of the United States

to draw those lines and to work with NATO, our key alliance, in dealing with Russia, to make clear that there are lines that cannot be crossed by the Russians.

BLITZER: Leon Panetta, thanks so much for joining us.

PANETTA: Good to be with you, Wolf.

BLITZER: Just ahead, I'll ask columnist and author Thomas Friedman about the world according to President Trump and his claims of great success where others see turmoil.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I turn on the TV, open the newspapers, and I see stories of chaos, chaos. Yet it is the exact opposite. This administration is running like a fine-tuned machine.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

[18:36:39] BLITZER: Right now we're getting new reaction to President Trump's news conference. It was an unapologetic defense of his first few weeks in office, touting what he calls incredible progress and dismissing reports of White House turmoil as simply, quote, "fake news." Take a listen.

(BEGIN VIDEO CLIP)

TRUMP: The media is trying to attack our administration, because they know we are following through on pledges that we made and they're not happy about it for whatever reason.

And -- but a lot of people are happy about it. In fact, I'll be in Melbourne, Florida, 5 p.m. on Saturday, and I heard -- just heard that the crowds are massive that want to be there.

I turn on the TV, open the newspapers, and I see stories of chaos, chaos. Yet, it is the exact opposite. This administration is running like a fine-tuned machine, despite the fact that I can't get my cabinet approved.

(END VIDEO CLIP)

BLITZER: All right. Let's talk about that and more. Thomas Friedman is joining us, the "New York Times" columnist, the best-selling author. His latest book is entitled "Thank You For Being Late: An Optimist's Guide to Thriving in the Age of Accelerations." It's a "New York Times" bestseller.

Tom, thanks very much for joining us.

THOMAS FRIEDMAN, COLUMNIST, "NEW YORK TIMES": Great to be with you, Wolf.

BLITZER: I'd like to get your reaction to the president's news conference. He says his administration is running -- you just heard it -- like a fine-tuned machine. That's his -- those are his words. Based on what you saw and heard today and throughout his first few weeks in office, is that an accurate statement?

FRIEDMAN: Well, you know what I was thinking Wolf, because I've been listening to the show now for about -- almost since you've been on. I was actually thinking about Vladimir Putin and Moscow.

He must have just pinned a medal on whoever ran the cyber campaign that helped get Donald Trump elected president. Because what did Russia want? Why did they want Trump as president? One, he thought it would delegitimize American democracy and democratic systems in general. And he's gotten now a president, basically, who's declaring the free press in America fake news.

And the other thing he wanted is to have an American president who would be so radioactive he could not lead the Western alliance, particularly the Atlantic alliance against Russia.

And what do we see? We see the speaker in the British Parliament say that, if Trump comes, he doesn't want him to speak in the Parliament. I think you'd get a very hostile reaction to the president from the street anywhere he came in Europe. And I find that really tragic.

You know, whether -- he's described it a fine-tuned, you know, watch or not fine-tuned watch, I think it's really too early to be judging any presidency. Frankly, with you, Wolf, I covered the first few months of Bill Clinton's presidency. That was pretty wild. I would neither be boasting about it, if I were Trump, of how perfect things are when you've just had your national security adviser dismissed by you.

But I also -- I think we as a press have to be very careful in presenting this as unmitigated chaos and, therefore, you know, the whole thing is going down in flames. It's really just ridiculously early to be judging this presidency whatsoever.

BLITZER: You wrote a column in the "New York Times" earlier this week. Let me read one passage from that article. It was entitled "What Trump is Doing is Not OK."

[18:40:07] You wrote this: "We need to rerun the tape. Ladies and gentlemen, we were attacked on December 7, 1941. We were attacked on September 11, 2001. And we were attacked on November 8, 2016. That most recent attack didn't involve a horrible loss of lives, but it was devastating in its own way."

Was the election of Donald Trump on that date in November really comparable to an act of war?

FRIEDMAN: I believe it was, Wolf. I think that it's one of the most dangerous and profound things that's happened to our country, certainly in my lifetime. Because what is it that actually distinguishes? What are our crown jewels?

It's the way we rotate power, our institutions, our Constitution, how we conduct elections. And an outside power, according to our top intelligence agencies and the FBI, intervened in this election.

I believe Donald Trump is the legitimate president, because I think there's a lot of things that went into his victory. And I don't think you can isolate the cyberattack on the Democratic Party and Hillary Clinton and its corrosive effect on Hillary Clinton and say that's the only reason he got elected.

But that was a very, very serious act. And the fact that we kind of were just walking away from it, the fact that the Republican Party shows, except in the case of heroic people like McCain and Lindsey Graham, who are saying, "Wait a minute. This is a huge deal," the fact that the Republican Party just wants to shrug it off, I think this is just incredibly dangerous.

We need to get to the bottom of it, and it requires a proportionate response to Russia. Because we cannot allow the very core of our constitutional process, our democratic elections to be attacked in this way.

BLITZER: At the press conference, the president also rejected the notion that he's been too soft on Russia. He said he's given the Russians nothing. He said it was Obama administration, along with Secretary of State Hillary Clinton who were to blame for Russian aggression. What do you think of that argument?

FRIEDMAN: Well, you know, I don't think -- I will separate two things, Wolf. One is how he's reacted to this -- the conclusion of our intelligence communities that Russia hacked this election; and he's basically just dismissed him.

You had to force him to even say that it was a bad thing. He has much harsher words for the cast of the play "Hamilton" than he has had for Vladimir Putin, you know, since he's been elected. And that, I find, just odd and disturbing.

Putin does not have our interests in heart. You know, this is a man, basically, who wants to undermine the European Union, our partner in the world, not to mention American influence and the spread of democracy around the world. So the whole thing is just very, very odd to me.

BLITZER: I'd also like to get your reaction to the president's constant attacks on the free press. Today, when questioned about connections to Russia, he simply said, "The leaks are real; the news is fake."

What are we supposed to make of a president who's willing to label any coverage he doesn't like as, quote, "fake news" or "very fake news"? He used that phrase today, as well. Is that damaging to our democracy?

FRIEDMAN: Well, you know, Wolf, one of the people I quoted in my book is my teacher and friend Dove Seidman (ph), who likes to make a distinction between what he calls formal authority and moral authority.

Now, Donald Trump has formal authority. He is the legitimate elected president of the United States, and which he keeps reminding us of, and how many electoral votes he got.

But what he has been doing, from the first day he took office until this press conference, is completely eroding his moral authority. When he stands up at a press conference and claims that he got more electoral votes, like, you know -- from anyone since George Washington, a patently false statement when Barack Obama, George W. Bush and Bill Clinton all got more electoral votes. And then when he's challenged on it, he simply says, "Well, that's the information I was given."

I mean, excuse me, you can Google that in two seconds, as reporters did.

What he's doing, Wolf, is he's completely undermining his moral authority as president. Now, why is that so important? Because one day soon, Wolf -- I can't predict when -- we're going to have a crisis. And Donald Trump is going to have to look into the eyes of the American people and say, "Trust me. This is what I learned from the intelligence community. I had to take this preemptive action vis- a-vis Iran. I had to take this preemptive action vis-a-vis North Korea or China or Russia." Or you know, whether it comes to our financial system. He's going to have to look us in the eye and say, "Trust me." And he has zero moral authority right now, I think, with way too many Americans; and he is going to regret that one day.

BLITZER: During his news conference yesterday with the Israeli prime minister, Benjamin Netanyahu, the president backed away from the longstanding bipartisan American commitment to finding what's called a two-state solution, a state of Israel, along a new state of Palestine. He said, "I'm looking at two states and one state. I like the one that both parties like."

Today, his ambassador to the United Nations, Nikki Haley, contradicted the president, saying, "We absolutely", these are her words, "We absolutely support the two-state solution but we are thinking out of the box as well."

What do you think of the Trump administration's approach to this very sensitive issue?

FRIEDMAN: Honest to God, Wolf, I can't make heads or tails of it because I don't even know what they're saying. He raised the prospect of one-state solution. Well, the one-state solution means Israel basically absorbs the West Bank, 2.7 million Palestinians.

There are Israelis -- even the president said maybe we should do that, but we would have to make them equal citizens. We have to give them the vote. And what would that mean for the future of Israel as a Jewish state. Or there are settlers who will say, well, we're not going to give them

vote, or sort of, you know, give them their own little mini government over here so they will live under a different law. Well, some people call that apartheid. So, that's what the one-state debate is all about.

And just to sort of drop that in a press conference something that has really in opposition to American foreign policy since 1967, and then the very next day, your U.N. ambassador says, no, no, we're still committed to that because you know what happened, all the Arab governments called up in the last 24 hours and said, what are you people doing? Is that -- is that the operation of a fine Swiss watch? I have no idea what the policy is or what the preference is.

BLITZER: Do you think that the president fully understands the complexities of the Middle East?

FRIEDMAN: You know, if he did, he certainly wouldn't be venturing down, you know, those roads. Because the Middle East, Wolf, I've always said, it only puts a smile on your face when it starts with them, with the people there, whether it's the Oslo peace process, or Camp David, which you covered, or even the Arab Spring. You know, we can help at the margins, but it's really got to start with them. Right now, there is really nothing starting with them.

What worries me, I guess, most, you know, Wolf, right now and I listened to this press conference, is that, you know, Trump has basically three things going for him right now.

One is that he's very entertaining and I fear that a lot of Americans are getting addicted to him. I fear that we in the media, and I don't exclude myself, are getting addicted to writing him because it's just so easy to do, number one. And so, he's got his entertainment value.

Number two, the stock market is going up and there is the hope and expectation that jobs will improve, that the economy will grow.

And number three, there is no immediate pressing crisis. But I tell you, Wolf, if he stops being entertaining, if a crisis comes along, I think it's been reckless in his part to boast about the stock market because markets go up and down, presidents should never talk about the Dow or the dollar.

You know, this all really change. I think this is all throat clearing right now. But I have my seatbelt tightly fastened.

BLITZER: Tom Friedman, thanks very much for joining us.

FRIEDMAN: Thanks, Wolf. Always a pleasure.

BLITZER: Just ahead, another curious exchange from the president's news conference. He asks an African-American reporter to try to set up a meeting with congressional black lawmakers.

(BEGIN VIDEO CLIP) REPORTER: Are you going to include the CBC, Mr. President, in your conversations with your urban agenda, your inner city initiative as well?

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Am I --

(CROSSTALK)

REPORTER: Are you going to include the Congressional Black Caucus and the congressional --

TRUMP: Well, I would. Tell you what, do you want to set up the meeting? Do you want to set up the meeting?

REPORTER: No, no, no. I'm a reporter. I know some of them but I'm --

TRUMP: Set up a meeting. I would love to meet with the black caucus. I think it's good, the Congressional Black Caucus.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

[18:53:50] BLITZER: President Trump said he decided to hold a surprise news conference today to take his message straight to the American people and what a message it was.

There's a lot to unpack with our political team.

David Axelrod, quickly, what did you think?

DAVID AXELROD, CNN SENIOR POLITICAL COMMENTATOR: Well, I think that in certain ways it was a surreal performance, but not in the context of Donald Trump. It was a surreal performance for a president. But it was very consistent with the Donald Trump we saw during the campaign, and he seemed to, you know, be reveling and playing that role.

The question is, is it consonant with the office of the presidency, the responsibilities of the presidency. I think that's the question that's troubling a lot of people tonight.

BLITZER: Well, what do you think? Is it?

AXELROD: No. I think that -- I've always said, what you say as president can send armies marching, markets tumbling, and facts do matter, and, you know, all of these things seem not to be impactful on him. And so, I think it's going to put maximum stress -- stress on our allies, stress on our institutions to try and compensate when he goes off in directions that are hard to fathom.

[18:55:00] BLITZER: David Chalian, what did you think?

DAVID CHALIAN, CNN POLITICAL DIRECTOR: Well, you know, so much of the coverage of this press conference has been about his embattled relationship with the media and taking on the press. I always think when it's the press versus Trump, Trump wins that. The country doesn't care so much about us getting our questions in or anything like that. So, I first want to sort of dismiss that.

But then, if we're properly assessing this president and this man -- this is a man who is consumed, who is obsessed with his relationship with the press. He is obsessed with his own media coverage, to the point it seems it is supreme to everything else at his job, on his desk in the Oval Office. So, then, it becomes something you want to look at because what is it that has him so consumed by his media coverage and how distracting is that from the job at hand?

BLITZER: Rebecca Berg, your thoughts.

REBECCA BERG, CNN POLITICAL ANALYST: I mean, I absolutely agree with David. It seemed like Donald Trump was more familiar with CNN's lineup than with the CBC, the Congressional Black Caucus, or any number of other things during this press conference. It was astounding to see this from behind the lectern that bears the seal of the president of the United States. It really is a remarkable moment for our country that this man with this style, that he, you know, showed -- showed us throughout the campaign but has brought with him into the White House, held a press conference as president in that way. I mean, there was too much almost to process.

BLITZER: David Swerdlick, he opened his news conference by saying, "I inherited a mess, it's a mess at home, a mess abroad, a mess, jobs pouring out." He was so negative about what he was given when he started.

DAVID SWERDLICK, CNN POLITICAL COMMENTATOR: Yes. And in my view that's a mischaracterization. There are some hotspots, Syria, for instance. But did he inherit this globalized mess as he described talking about jobs?

Unemployment under President Obama was cut in half, stock market was up about 12,000 points under President Obama. There are many situations that were stabilized around the world. President Obama and the Republican members of Congress put TPP in place, President Trump already has scrapped that.

BLITZER: Think about, David Axelrod, what President Obama inherited eight years ago when he took office. There were a couple hundred thousand U.S. troops in Iraq and Afghanistan, the Dow Jones was below 7,000, unemployment 700,000, 800,000 jobs a month were being lost.

President Obama eight years ago, he really did inherit a mess.

AXELROD: Yes. Look, there's no easy time to become president of the United States. But if you want to consider what it's like to really confront crisis, then you should have walked in the door, as this president did, President Obama eight years ago, the quarter before he took office, the economy shrunk by 8.9 percent. It was the worst quarter since 1930. The month he took office, 800,000 jobs were lost. And the economy was on the precipice of another Great Depression. And I remember those days very clearly. So I don't begrudge any president feeling like they've got a lot to

deal with. But this president was -- by any objective standard, this president was dealt a much better hand than the last president.

BLITZER: Yes. David Chalian, under 5 percent unemployment, what, four point percent and maybe about 10,000 U.S. troops right now deployed to Iraq and Afghanistan.

CHALIAN: Yes. I mean, that was just another deflection tactic to sort of get away from the stories that have been consuming this White House, they've been under siege this week. And he clearly got so frustrated with the coverage that he said, listen, we're going to do a press conference today, because this is what worked to well for him in the campaign. It reminded me of his phone interviews and would speak at length on all these topics and sent the media scrambling every which way.

He loved that. He relished that today. It was his way of trying to move on. I don't know -- it's one thing to be able move on from campaign controversies. It's another thing, these problems on his desk aren't going away.

BLITZER: Rebecca, he's holding another campaign rally Saturday, he pointed out, 5:00 p.m. in Florida. He's the president of the United States and he's talking about campaign rallies.

BERG: He is and I think Donald Trump is missing the fact that his approval is low not because his supporters are abandoning him, and some might be. But the real problem is independents and Democrats who are still not on board with this president. He's talked a lot about trying to unite the country but hasn't really done anything proactively to try to do that. And at the same time, he's not really helping Republicans in Congress who want to help him achieve some of his legislative goals.

And you can only imagine and certainly, I received some text messages during this press conference who were just sort of rolling their eyes, completely perplexed at what this does to help them and their cause.

BLITZER: It was really remarkable hour and 15 minutes. A lot of us will remember that news conference for a long time to come.

Guys, thanks very much for all of that.

That's all the time we have. Thanks very much for watching.

Our special coverage continues right now with "ERIN BURNETT OUTFRONT".